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PBF Logistics to acquire interest in Torrance Valley Pipeline Co.

Published by
World Pipelines,

PBF Logistics LP (PBFX) has recently announced that it has entered into a letter of intent to acquire a 50% interest in Torrance Valley Pipeline Company LLC (TVPC) from an affiliate of PBF Energy Inc. The total consideration is of approximately US$175 million in cash.

The letter of intent sets out the terms and conditions under which PBF Energy intends and would be willing to enter into mutually acceptable definitive agreements containing material terms consistent with those described in this release.

PBFX and PBF Energy currently anticipate executing definitive agreements within the next 30 days, closing the acquisition in 3Q16, subject to customary closing conditions. The acquisition is expected to be financed through a combination of cash on hand, borrowings from PBF Logistics LP’s senior secured revolving credit facility and the proceeds of PBFX's equity offering.

PBFX and PBF Energy Chief Executive Officer Thomas Nimbley said: "The potential acquisition of a 50% interest in the TVPC reflects PBFX's ongoing commitment to deliver sustained growth to our unit holders and diversify our earnings base with high-quality assets."

TVPC owns the 189 mile San Joaquin Valley pipeline system, with a throughput capacity of approximately 110 000 bpd. The system is comprised of the M55, M1 and M70 pipelines, which are the primary crude gathering and transportation lines that supply PBF Energy's Torrance refinery. The assets also include 11 pipeline stations with approximately one million bbls of combined storage capacity and truck unloading capability at two of the stations.

Upon closing, the partnership would enter into ten year term transportation services agreements with subsidiaries of PBF Energy, containing minimum volume throughput commitments (MVCs) of approximately 50 000 bpd for the M1 and M55 pipelines and 70 000 bpd for the M70 pipeline and for storage capacity at certain tanks. This represents approximately 50% of the total available shell capacity of the storage facilities. Under the services agreement and the expected minimum throughput rates, the acquired interests of TVPC are expected to generate an estimated annual net income of approximately US$9.4 million based on revenues of approximately US$38.5 million, operating income of US$11 million and estimated earnings before interest, taxes, depreciation and amortisation of approximately US$20 million. Annual maintenance capital expenditures for the Partnership's acquired interest would be expected to average approximately US$1.5 million.

The terms of the potential transaction are being reviewed by the Conflicts Committee of the board of directors of the general partner of PBF Logistics.

Adapted from press release by Anna Nicklin

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